May 20, 2011

When it comes to the energy sector, New Jersey is not shy about handing out incentives.

There are financial incentives to build solar systems on homes, roofs and landfills; new credits soon to be awarded to help develop offshore wind farms; and even ratepayer subsidies potentially available to construct three natural-gas-fired plants.

Until last year, there also was a fund available to build combined heat and power (CHP) plants, a technology used at more than 250 locations in New Jersey. The scheme is popular with hospitals, schools and factories because their plants are generally more efficient and less expensive than conventional fossil fuel plants. CHP produces electricity and retains the heat usually lost at traditional generating stations. Instead, that heat is used to cool and heat other facilities.

Pushing for a Program

But the pot of money for CHP projects was diverted to help balance the state budget last year, and the state Board of Public Utilities (BPU) voted to eliminate the source of those funds, the Retail Margin Fund. That has left the sector seeking to develop new ways to build CHP plants. Yesterday they made a pitch before the Assembly Telecommunications and Utilities Committee to push for a program that would lock the state into building a set amount of CHP facilities each year.

The idea would be to create an Alternative Energy Portfolio Standard, somewhat akin to the Renewable Portfolio Standard (RPS) New Jersey and many other states have set up to promote the development of solar and wind power. RPS requires power suppliers to ramp up the amount of electricity purchased from renewable energy sources each year. In New Jersey, the state hopes to get 30 percent of its electricity from renewables by 2020.

In Massachusetts, where a similar program to promote CHP was developed, it led to a 58 percent increase in electricity coming from combined heat and power plants, according to Paul MacGregor, senior vice president of Nexant, a San Francisco company providing clean energy solutions.

MacGregor and others urged New Jersey to aggressively develop such a program to help achieve a goal in the state’s Energy Master Plan to install 1,500 megawatts of CHP. (One megawatt is enough to power about 800 homes.) If the state did so, it would have a minimal impact of less than a 1 percent increase in customers’ electric bills, which would be more than offset by potential savings. Those savings would be realized primarily by avoiding the $1.7 billion in costs of building conventional power plants.

Lower Greenhouse Gas Emissions

Beyond the benefits of cost savings to consumers, building 1,500 megawatts of CHP capacity would lead to lower greenhouse gas emissions, create jobs for residents and could help lower energy costs for other ratepayers by reducing congestion on the power grid, MacGregor said.

"The bottom line: over time, it saves money," he said.

The potential market for CHP in New Jersey is much greater than what the energy master plan envisions, said Gearoid Foley, the founder of Integrated CHP Systems Corp. More than 6,000 megawatts could be produced in the state if facilities that can use the heat to reduce cooling and heating expenses employed CHP, Foley said.

"There are a lot of government buildings that could benefit from CHP," he noted. That premise is currently being pursued by the state BPU, which this past week opened a solicitation to various government entities offering up to $20 million in federal stimulus funds to build CHP on site.

The concept of an alternative energy portfolio standard was endorsed by the chairman of the Telecom and Utilities Committee, Assemblyman Upendra Chivukula (D-Somerset). "We have to come up with a way to recognize and promote alternative energy technologies," he said after the hearing. He noted CHP could complement the state’s efforts to develop solar and wind power, two clean energy sources that are being promoted by the state but provide only intermittent power.

Hal Bozarth, executive director of the Chemistry Council of New Jersey, said he would back CHP getting incentives, noting that it is better than subsidizing solar, which is much more expensive.

"I think CHP is a fabulous way to go, given the fact that the monopolies refuse to build new generation," said Bozarth, which he blames for industrial electricity rates 70 percent above the national average.